Mutual funds investing in debt securities are among the most secure investment options, which provide regular income while protecting the capital invested. Funds that are part of this category bring a great deal of stability to portfolios with a large proportion of equity, while providing dividends more frequently than individual bonds. U.S. government bond funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered the safest in the bond fund category and are ideal for risk-averse investors.
Meanwhile, a short-term government bond fund is a mutual fund that is limited by its investment objectives and fund bylaws to investing primarily in short-term obligations of the federal government or its agencies. Depending on the fund's definition, short term can be up to five years.
Below we will share with you three top rated short-term government bond mutual funds. Each has earned a Zacks Mutual Fund #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. Investors can click here to see the complete list of funds .
PNC Ultra Short Bond I PNCIX maintains a diverse portfolio by investing mainly in fixed-income securities like investment-grade securities. These investment-grade securities include domestic government securities, mortgage-backed securities, asset-backed securities, and corporate bonds. PNCIX's portfolio is believed to have maturity of 18 months or lower. PNC Ultra Short Bond I has three-year annualized returns of 1.1%.
PNCIX has an annual expense ratio of 0.32% is lower than the category average of 0.50%.
PNC Ultra Short Bond A PSBAX seeks to provide current income while preserving capital. PSBAX invests in investment-grade securities including U.S. government securities, corporate bonds, asset-backed securities and mortgage-backed securities. PSBAX has a dollar-weighted average maturity of not more than 18 months but may vary outside that range from time to time. The PNC Ultra Short Bond A fund has three-year annualized returns of 0.8%.
As of December 2018, PSBAX held 99 issues, with 3.66% of its total assets invested in United States Treasury Notes 1.5%.
Prudential Short Duration High Yield Income A HYSAX invests a huge part of its assets in high-yield fixed income securities that are rated lower than investment grade. The fund invests in securities with different maturities. HYSAX seeks maximization of income. Prudential Short Duration High Yield Income A has three-year annualized returns of 4.3%.
Ryan Kelly is one of the fund managers of HYSAX since 2012.
To view the Zacks Rank and past performance of all short-term government bond mutual funds, investors can click here to see the complete list of funds .
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